The Advertising Mix for a Search Good
Simon P. Anderson
University of Virginia - Department of Economics
University of Cergy-Pontoise - THEMA
CEPR Discussion Paper No. DP8756
We extend the persuasion game to bring it squarely into the economics of advertising. We model advertising as exciting consumer interest into learning more about the product, and determine a firm's equilibrium choice of advertising content over quality information, price information, and horizontal match information. Equilibrium is unique whenever advertising is necessary. The outcome is a separating equilibrium with quality unravelling. Lower quality firms need to provide more information. For a given quality level, as a function of consumer visit costs, first quality information is disclosed, then price information and then horizontal product information are added to the advertising mix. Some suggestive evidence is provided from airline ads in newspapers.
Number of Pages in PDF File: 34
Keywords: advertising, content analysis, information, persuasion game, search
JEL Classification: D42, L15, M37working papers series
Date posted: January 20, 2012
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